American Funds plans to open mortgage, municipal bond funds

Capital Group Cos., the largest U.S. manager of stock mutual funds, asked regulators for permission to open its first new fixed-income products in four years.
JUL 18, 2010
Capital Group Cos., the largest U.S. manager of stock mutual funds, asked regulators for permission to open its first new fixed-income products in four years. The two funds, targeting municipal bonds issued in New York state and mortgage-related securities, would be available to investors at the beginning of December, according to the company, which filed prospectuses with the the U.S. Securities and Exchange Commission on Aug. 6. Investors, discouraged by falling equity markets, put $139.1 billion into bond mutual funds in the first half of 2010, compared with $2.64 billion into stock funds, according to research firm Morningstar Inc. in Chicago. Capital Group’s American Funds managed $835 billion, excluding money-market funds, as of June 30, with about 85 percent in stock-dominated products. The Los Angeles-based firm oversees about $1.1 trillion. “This has been part of our plan for several years,” Maura Griffin, a New York-based spokeswoman for closely held Capital Group, said in a telephone interview. “This is not a response to current market conditions.” John Smet, a senior bond fund manager with the firm, said in a November interview that Capital Group planned to expand fixed-income offerings and assets in a “5 to 10-year process.” The Standard & Poor’s 500 Index of U.S. stocks declined 3.2 percent this year through yesterday. The MSCI EAFE Index of developed non-U.S. markets fell 7.8 percent. Fund Withdrawals Morningstar, which first reported the filings today, estimated that American Funds lost $19 billion to investor withdrawals during the first half of the year. American was alone among the top 10 U.S. mutual-fund families to have net withdrawals. Vanguard Group Inc., the largest U.S. manager of stock and bond mutual funds, attracted $39.9 billion in client money during the same period. The Valley Forge, Pennsylvania-based company oversees $1.07 trillion. American Funds Mortgage Fund would invest at least 80 percent of its assets in mortgage-related securities including futures contracts, according to the proposed prospectus. Tax- Exempt Fund of New York would invest at least 80 percent in municipal bonds issued by the state, its agencies and municipalities. Fund managers acting independently will pick securities, an approach the firm has used for more than 50 years. American Funds last opened a bond fund, the Short-Term Bond Fund of America, in October 2006.

Latest News

WealthReach, VastAdvisor tie-up takes aim at advisors' cold outreach problem
WealthReach, VastAdvisor tie-up takes aim at advisors' cold outreach problem

Partnership pairs organic lead detection with paid ad targeting to help end "spray-and-pray" marketing for growth-seeking advisory firms.

LPL taps Wells Fargo vet as new chief technology and information officer
LPL taps Wells Fargo vet as new chief technology and information officer

Jonathan Lewis joins the wealth management giant as it proceeds with a $2 billion AI and technology push for advisors.

LPL Financial lands $1.6B Conte Wealth Advisors from Cambridge
LPL Financial lands $1.6B Conte Wealth Advisors from Cambridge

A third-generation Pennsylvania firm with 24 advisors and $1.6 billion in client assets has left Cambridge Investment Research.

Confluence Financial Partners secures minority stake from PE firm
Confluence Financial Partners secures minority stake from PE firm

Fast-growing $7.6 billion Pittsburgh-based RIA secures growth capital but retains full management control.

US bank M&A wave set to reshape wealth management landscape
US bank M&A wave set to reshape wealth management landscape

Bain projects up to seven US trillion-dollar banks by 2030 as consolidation accelerates.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income